Home renovations and emergencies seem to often happen at inconvenient times. If you’re considering a cash-out refinance on your home it could take up to 45 days to get the money you need.
Don’t have time to wait? A cash advance might be a better choice if you need funds now. The big question is, what’s the difference between a cash advance and cash out refinance?
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What is a cash advance?
A cash advance is a short term loan provided by a bank, credit card company, payday lender, or alternative banking source. Often used as a quick way to receive cash, but typically comes with high-interest rates and quick repayment terms.
Individuals who struggle with poor credit usually turn to these types of loans when financially strapped. Generally, you will not have your credit pulled to qualify for a cash advance. Most of the time you only need proof of income, personal identification, bank information, and check or ACH authorization.
Not all cash advances are equal
Beware of predatory payday loans and cash advances, tribal lending, and illegal online payday lenders. You could end up paying triple-digit APRs and put yourself in a sticky financial situation.
If you choose to borrow a high-interest payday loan in your state, make sure you know your local laws first. These types of loans aren’t the only cash advance loans available. Instacash from MoneyLion offers up to $250 at 0% APR and no hard credit check is required.
The process is simple! First, download the MoneyLion app and create an account. Then link your checking account and you’ll pay back the loan on your next payday. Need the money now? Pay a small fee for turbo delivery and access your funds instantly!
What can you use a cash advance for?
A cash advance can be used for whatever you need, there are no restrictions on where you spend the borrowed money. If you’re thinking about using a cash advance to cover home renovations, try doing some of the work yourself to cut costs.
YouTube and Pinterest are DIY havens filled with home improvement tutorials. For the more advanced renovations that need licensed professionals, cover the costs with the convenience of an immediate 0% APR cash advance from Instacash.
What is a cash-out refinance?
Not to be confused with an equity loan, a cash-out refinance is when a homeowner takes out a larger mortgage in exchange for the equity in the form of cash. The new larger mortgage pays off your old mortgage and you have access to the equity in cash.
Homeowners often do this when interest rates are low allowing them to take out their home equity to pay for home renovations, consolidate debts, and fund investments and college funds.
To qualify, you must have an existing mortgage with around a 620 credit score or higher. Requirements are determined by the lender and the following criteria could determine eligibility:
- Debt to income ratio of less than 50%
- Amount of equity in your home
Cash-out refinancing could drag out debt
Considering a cash-out refinance to lower the interest rate on your debts and roll them into one payment? This might sound appealing to you, but if you can pay your debts back in a shorter period, you should.
When you consolidate your debts into a new mortgage, that loan can take 30 years to pay back. No matter what interest rate your current debt is at, you should tally up the amount you’d pay overtime to compare total costs before you drag out your debt for decades.
Should I use a cash-out for credit card debt or emergencies?
For small home renovations like a bathroom makeover or emergency plumbing repair, a cash-out refinance isn’t worth the headache. Closing costs alone are 2-5% of the mortgage and could end up costing more than the amount you need.
Reach out to friends and family, see if they know any licensed professionals that can offer you a good deal, and use a low-cost cash advance like a Credit Builder Loan to borrow up to $1000.
Our loans come with competitive interest rates, same-day funding, and don’t require a hard credit pull. You can monitor your credit while you pay back the loan over 12 months and boost your score at the same time.
If you are working on your money management habits, especially with lines of credit, mindlessly spending your home’s equity will cost you later! Just because you have equity available doesn’t mean you need to use it.
Train your financial muscles by using RoarMoney and utilize the Financial Heartbeat to strengthen your relationship with your finances.
Tap Into Cash With MoneyLion
Whether you’re looking to repair your bathroom or fix your credit, MoneyLion has you covered. Sign up for a RoarMoney account today and apply for a Credit Builder Loan for same-day cash. We’ll report all your payments to the three major credit bureaus and help boost your credit by 60 points within 60 days!
Know a friend who could use a small cash advance? Use our Credit Builder referral program and earn $10 for every signup.